April 2020 Employment Law changes affecting payroll

National Minimum Wage and National Living Wage increase

There will be an increase of 6.2% for workers over 25, from £8.21 to £8.72. Workers aged 21 to 24 will receive £8.20 (previously £7.70) whilst the 18 to 20 age group will receive £6.45 (previously £6.15). Under 18’s will receive £4.55 (previously £4.35). Apprentice rates will increase to £4.15 (previously £3.90). Click here for more information.

The threshold for National Insurance Contributions (NIC’s) increases to £9,500 for both employed and self-employed people

From April 6, you will pay no national insurance on the first £9, 500 of your earnings. This is expected to benefit around 31 million people. An average employee is expected to save around £104 in 2020-21, whilst self-employed people are expected to have a saving of around £78.

It is worth noting that those taken out of paying national insurance won’t lose out on credits towards their state pension. (This is important because people need at least 10 years’ credit to receive any state pension and 35 years to receive the full state pension.)

All other thresholds for 2020-21 will rise according to inflation, except for the upper NIC’s thresholds. The upper NIC’s thresholds will remain frozen at £50,000, as announced at Budget 2018. For more information, click here.

Employment Allowance Increases

From 6 April, the Employment Allowance will increase by £1,000 to £4,000. This means eligible businesses and charities will be able to claim a greater reduction on their Secondary Class 1 National Insurance Contributions liability.

The Employment Allowance law is also being reformed to restrict access to employers whose National Insurance Contributions liability in the previous tax year was under £100,000. For more information click here.

From 6 April 2020, The ‘Swedish Derogation’ provisions set out in Regulations 10 and 11 of the AWR (Agency Worker Regulations), will be abolished.

The Agency Worker Regulations (AWR) entitle agency workers to receive the same pay and basic working conditions as permanent staff once they have completed 12 weeks of continuous service working in the same role.

What is the Swedish derogation?

The Swedish derogation in the AWR provided an exemption from this, as far as pay is concerned. Also known as ‘pay between contracts’, it meant that temporary agency workers were guaranteed to receive a certain amount of pay between contracts if they relinquished the right to the same pay as permanent staff.

What does the ‘abolition of the Swedish derogation’ mean for agency workers?

Agency workers who have been in employment for 12 weeks will be entitled to the same pay rate as those on permanent contracts. This also means that temporary agency workers, who are employed on existing contracts that contain the Swedish derogation, must be provided with a written statement telling them that with effect from April 6, 2020, these provisions no longer apply. They are now entitled to rights relating to pay. This written statement must be provided by April 30, 2020.

Agency workers to be provided with ‘Key Information Document’ (KID) when signing up with a new employment business
(Regulation 13A of the Conduct of Employment Agencies and Employment Businesses Regulations 2003 (the ‘Conduct Regulations’)

This new regulation will take effect from 6 April 2020. From this date, all agency workers must be given a key information document before agreeing terms with an employment business. In practice, this will mean that the key information document will be one of the first things they receive. It should be pointed out that the regulation does not apply to agency workers with existing terms with an employment business. However, they will be entitled to a key information document when they sign up with a new employment business.

What is the purpose of the Key Information Document? (KID)

The aim of the scheme is to ensure all workers, regardless of the employment status, are aware of key information such as pay, fees, deductions and holiday entitlements in relation to their engagement.

The regulation does not state that an employment business must offer multiple engagement types, such as; PAYE or via different umbrella solutions. However, it should be considered as best practice, that where multiple engagement types occur, the business holds a standard key facts page corresponding to each payment method, clearly detailing the different payment methods. The worker can then understand the different deductions or at least how they are calculated. Either way, the employment business must issue a KID to reflect how a worker’s pay is to be processed. Please click here for more information.

Holiday Pay calculation for workers on variable hours
(Amendment to Working Time Regulations 1998.)

This amendment will make changes to the holiday reference period which was currently 12 weeks.

Holiday pay for variable workers was originally calculated on their average weekly wage earned over 12 weeks. From 6 April 2020, the holiday reference period has been increased to 52 weeks. This means an employer will need to work out the average hours worked and average pay from 52 weeks. If you have workers on variable hours in your employment for less than 52 weeks, the holiday reference period will be the number of weeks for which they have been employed.

The aim of the new rule is to ensure that those employed within the ‘gig economy’ don’t miss out on holiday pay. For more information on holiday pay, please click here.

Written Statement of Terms from first day of employment
(Amendment to the Employment Right Act 1996)

Prior to April 6 2020, employees had to be provided with a written statement of terms within two months of employment if they had been continuously employed for more than one month. Employers will now have to provide a ‘statement of particulars’ to all new employees and workers on the first day of employment. This should include the hours and day that the employee worker has to work, details on paid leave, probationary period, training and any other benefits.

In addition, existing employees can, on or after 6 April 2020, request an updated ‘statement of particulars’ from their employer, which has to be delivered within one month of the request.

Parental Bereavement Leave
(Addition to Employment Right Act 1996)

From 6 April 2020, Parents will be entitled to two weeks paid leave if they lose a child under 18 or suffer a stillbirth from 24 weeks of pregnancy.

Statutory Maternity leave

Statutory maternity leave pay will rise to £151.20 a week from April 5 2020.

A reminder…

Off-Payroll Working Rule reforms postponed

Just a reminder, that due to the coronavirus, the planned IR35 tax reforms for the private sector will be delayed for a year. These measures will now come into effect from 6 April 2021. This has been welcomed by the industry as it gives them more time to get ready for the reforms.

Did you know?

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